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Investing in equities with patience can help you achieve financial freedom. Meet Abhishek Basumallick of Intelsense Capital, who left his IT job and said no to monthly paychecks after getting multibagger returns from various stocks.

Over the past 20 years, he has identified many stocks which have given him robust returns. Some of the stocks in the list include Supreme Industries, Bajaj Finance, Cera Sanitaryware, Hester Bio, PI Industries, Pidilite, Astral Poly, Mayur Uniquoters, Ajanta Pharma, Divis Lab and Laurus Labs, among others. He is still holding some of these stocks.

“These returns came over many years of patiently holding them after buying,” Basumallick said. In an interaction with Money9, he also explained why he left his IT job and became a full-time investor.

Edited excerpts:

Q: How do you pick a stock?

Basumallick: The investing universe in India is not very large. If you look at it qualitatively, there are around 200-300 investible stocks. Some of the few things I look at when looking for quality are: return on capital employed, debt levels of the company (both net debt and debt/equity ratio), promoter holding and pledging to understand the skin in the game of the promoters as well as operating margins and how stable they are.

Q: How do you decide whether to hold or sell the stock?

Basumallick: Over the last few years, I have segmented my investing into three buckets — long-term, positional technofunda trades and quant-based momentum investing. The big multibaggers typically come in the long-term holding segment because there I am giving the stock time to grow. I hold on as long as the business keeps performing well. I am a strong believer that growth is what drives prices in Indian markets. So, as long as a company keeps delivering good revenue and profit growth, there is usually no reason to sell. The other reason, of course, is if I am in need of cash to invest in another more lucrative opportunity, I would then tend to sell partially or fully to raise capital.

Q: What are the things you focus on before investing?

Basumallick: As I mentioned before, I have started focusing on three completely separate styles of investing these days, so what I see are separate for each. But in general, I study the fundamentals of a company, its growth prospects and the prospects of the industry. After learning technical analysis, I have not done any investment without confirming the chart patterns in them. On the quant side, the idea is to be able to follow the trend in strong momentum stocks in a systematic unemotional manner.

Q: What investing lesson would you like to share with investors?

Basumallick: The most important lesson is that investing is simple, but not easy. Those who have joined in the last year may feel it is very easy to make money. There will always be times like this when money-making is easy because the market is in a major bull trend. That is not how it always will be. And if you are not careful of risk management, it will come back to haunt you later.

If you are new to investing, it is very important to keep learning. Investing is a skill. It needs to be learnt. It is like learning to bat. Some will have inborn talent and others will apply themselves by learning the technique and spending hours in practice. The good part is today there are many resources available to learn. But you need to be able to discern which is good and which is bad. A lot of folks on Twitter, YouTube continuously tweet about stocks or put up videos. Figure out who you want to follow. Just remember that a lot of those are actually clueless about investing and will disappear at the first sign of a market crash.

Q: What prompted you to leave your IT job and become full-time investor?

Basumallick: The first reason was of course the passion for investing. I have always been a voracious reader and generally a curious person. Investing helped flame the urge to learn more. I get energised when I learn about a new business or an entrepreneur starting a new venture or a company revamping its business strategy to address new market challenges.

Secondly, the job was getting very boring. Doing meetings the whole day, ending up becoming just a conduit of information, was not very exciting.

And lastly, but perhaps most importantly, I had made enough money from my investing to become financially independent. I did not need the paycheck any longer. That made the decision easier for me. Although getting my family, especially my mother, to agree to my decision was not easy!!

Q: Can you throw some light on your journey in the stock market so far? How you have evolved over time as an investor?

Basumallick: Difficult to talk about a 21-year journey in a few words. The main thing was I came with no money (literally started with five thousand rupees), no experience, no financial educational background, no one in the family or friend circle in the markets and yet was able to get to a stage of financial independence within 15 years. So I am proof that it is possible.

The biggest positive influence on my journey was the ValuePickr forum (www.valuepickr.com). Meeting some great people on the forum, who happened to be some of the absolute best investors in the country, forging friendships with them to the extent that a number of them are now like family members have been one of the best gifts of my life. The acceleration of the learning curve that I got from VP (as we call ValuePickr normally) was just mind-boggling. Any serious new investor in India who is not using (at least reading through the threads) the forum is missing a great opportunity.

Q. What are the lessons you learnt from mistakes you made in the past?

Basumallick: Oh, way too many. We can have a full session only on mistakes. But the main areas of mistakes have been those of omission. Stocks that I identified but did not either buy or could not hold on for long enough to make a significant difference. From a long term returns perspective that has made the most difference.

Q. Why are retail investors not rattled this time despite uncertainty over Covid cases in the country?

Basumallick: Because of their lived experience. They have seen markets go straight up after the initial shock in March 2020. It is being programmed into people’s minds that markets can only go in one direction. So, when the market falls a bit, you are getting eager buyers who have been programmed to buy the dip. This will come to a violent end someday and a lot of people will get seriously hurt. But no one knows when that someday will come. So, right now, people are dancing as long as the music is playing.

Q. Where do you see the market going from here now? Which kind of stocks and sectors are looking good from an investment perspective?

Basumallick: I try not to have a firm view on the market direction. Mainly because I have seen that I am not smart enough to forecast the market direction correctly in a consistent manner. There is no doubt that valuations are stretched and has been such for a few years now. They could and should moderate once interest rates start moving upwards. And there could always be some black swan event that will impact the market.
I think some sectors like pharma and healthcare, chemicals, IT, real estate could do well. Also, emerging sectors like renewable energy is very interesting.

Q: Do you follow any other investor and genre of books you like to read?

Basumallick: I follow a lot of investors both in India and globally more to understand their investment frameworks and learnings, not merely from a stock-picking perspective. I have read a lot of books over the last 20 years but now concentrate on re-reading some of the older gems. After a while, there is little incremental information you can get from reading investment books. So, then you start diversifying into other areas like strategy, communication, psychology, sociology or history. I also read a lot of fiction – mainly thrillers and detective books.

Q: How much return your advisory firm has garnered since March 2020 lows and since inception?

Basumallick: I have not calculated from March lows, but the last annual year (FY 2020-21), the returns for the long-term advisory was 60%, for Hitpicks it was 92% (annualised) and for Quant it was 98%. So, it would be a bit better from March lows.